Concentrations, Risks, and Uncertainties

12 Months Ended

Dec. 31, 2023

Risks and Uncertainties [Abstract]

Concentrations, Risks, and Uncertainties

Note 10 – Concentrations, Risks, and Uncertainties

a) Credit risk

Cash deposits with banks are held in financial institutions in China, which deposits are not federally insured. Cash deposits with banks of which at times may exceed federally insured limits. Accordingly, the Company has a concentration of credit risk related to the uninsured part of bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk.

b) Concentration

The Company has a concentration risk related to suppliers and customers. The inability of the company to maintain existing relationships with suppliers or to establish new relationships with customers in the future may have a negative impact on the company’s ability to obtain goods sold to customers in a price advantageous and timely manner. If the Company is unable to obtain ample supply of goods from existing suppliers or alternative sources of supply, the Company may be unable to satisfy the orders from its customers, which may have a material adverse impact on revenue.

For the year ended December 31, 2023, one customer accounted for 10% or more of the Company’s total net sales revenues for the year.

As of December 31, 2023, two customers accounted for 100% of the Company’s total accounts receivable. 

For the year ended December 31, 2023, one supplier accounted for 10% or more of the Company’s total net purchases for the year, respectively.

As of December 31, 2023, one supplier accounted for 100% of the Company’s total accounts payable. 

c) Unissued VAT invoices

The products that are sold by the Company in PRC are subject to value-added tax (“VAT“) at a rate of 6% of the gross sales price or at a rate approved by the Chinese local government. This VAT may be offset by VAT paid on purchase of raw materials included in the cost of producing the finished goods sold.

From October 31, 2023 to December 31, 2023, due to the rules imposed by local authorities on newly established companies, which limited the issuance of VAT invoices per month. Consequently, the Company was not able to issue VAT invoices for all its sales. As of December 31, 2023, the Company had issued a total of $133,379 in VAT invoices for its sales, leaving $2,013,794 in sales unissued. The Company has submitted a request to increase the allowable VAT invoice amounts and is currently awaiting approval. Upon receiving approval, the unissued VAT invoices will be issued.

The local authority may require the Company to rectify the issue above by demanding payments and submitting the relevant filings within a specified time period. If the Company fails to do so within the specified time period, the local authority may impose a monetary fine on it and may also apply to the local people’s court for enforcement.

If the Company receives any notice from the local authority, the Company will be required respond to the notice and pay all amounts due to the government, including any administrative penalties that may be imposed, which would require the Company to divert its financial resources which may impact its resources, if any, to make such payments. Additionally, any administrative costs in excess of the payments, if material, may impact the Company's operating results.

As of December 31, 2023, the Company has not received any notice from the local housing authority or any claim from our current and former employees.

d) Restriction on cash disbursement on bank account

As a newly established business, the Company experienced restrictions imposed by the bank on new bank accounts by limiting its deposits and disbursements. In order to avoid disruption to the business operations, the Company has engaged a related party, Shenzhen Junfeng Wood Chain Network Technology Co., Ltd., to collect sales revenues on behalf of the Company. These funds are then deposited or transferred to the Company's bank account on a regular basis, ensuring the continued liquidity necessary for operational activities.

As of December 31, 2023, the Company had an outstanding receivable of $1,110,135 from the related party as a result of this arrangement. These receivables represent funds collected on behalf of the Company but not yet remitted to its bank account. As of April 9, 2024, the Company received the outstanding receivable balance.

Management continuously evaluates the impact of these restrictions on the Company's cash management and operational efficiency. Despite the challenges posed by the restriction on cash disbursement, the Company remains committed to ensuring the uninterrupted conduct of its business activities.

It is important to note that the amounts receivable from the related party are subject to periodic reconciliation and may fluctuate over time based on sales activities and remittance schedules.